Iseq starts year with 2% gain

Improved economic activity in China, higher than expected declines in German unemployment and stronger manufacturing in the US helped pushed stock markets higher today, lifting the Iseq by 2 per cent or 58.70 points to 2,960.52.

Equities in Ireland and the UK missed out on the rising market on yesterday because of the New Year bank holiday but enjoyed a strong rally when stock markets reopened for the first session of 2012.

DUBLIN

The airlines were among the big performers after Emirates bought control of a UK online flight and hotel reservations firm, leading to speculation that it may expand further into Britain and Ireland.

Ryanair rose 4.2 per cent or 15 cent to close at €3.78, while Aer Lingus lagged its rival but still rose by almsot under 4 per cent or 2.5 cent to land at 66 cent at the close.

Packaging giant Smurfit Kappa finished the day 3.85 per cent or 18 cent higher at €4.85 a share on better prices for containerboard.

Building materials company Kingspan rose 3 per cent or 19 cent to €6.55 after the company’s chief executive was reported in the German media yesterday to be interested in buying a company in that country.

There was heavier than usual trading in building materials and DIY group Grafton as one Dublin trader reported two big purchases following chief executive Leo Martin’s retirement last week.

The stock closed up 2.6 per cent or 6 cent at 64 cent on the day.

The gusty weather didn’t deter investors in FBD as the insurer rose 3 per cent or 20 cent to €6.70 after the market absorbed last Friday’s news about the sale of its insurance brokerage business.

The one notable decline on the day was financial company IFG which ended the day 4.8 per cent or 5 cent lower at €1 a share.

The lifting of the ban on short-selling by the Central Bank on Friday had little effect on Bank of Ireland. The stock, the only bank that could have been affected by the move as it is the only Irish bank left on the main Irish market, rose 3.66 per cent to 8.5 cent.

OIL

Oil prices rose more than 3 per cent as tensions between Iran and the US raised fears of possible supply disruptions over Tehran’s threats to act if Washington sent a naval carrier to the Persian Gulf.

About 40 per cent of oil consumed globally passes through the strait between Iran and Oman at the mouth of the gulf.

Brent February crude oil reached the highest intraday price in almost a month.

EURO

The sharp drop in German unemployment figures to the lowest in two decades boosted the euro as it climbed 1 per cent to $1.3061 against the US dollar.

The dollar fell as the stronger-than-expected economic data whetted appetite for risk among investors in the euro.

GLOBAL STOCKS

The FTSE ended up 2.3 per cent to close at its highest level since October 28th, catching up to some extent on the gains made elsewhere on Monday when the London markets were closed.

The strongly positive economic data out of China, Germany and the US encouraged investors to set aside fears over the debt crisis in the eurozone.

Mining stocks contributed more than a third of the gains on the FTSE 100 on strong manufacturing figures in China and the US.

The banks were back in favour for the day as investors dipped into riskier assets on the upbeat news.

Barclays performed the best of the financial stocks, rising 5.8 per cent as Citigroup said that BarCap could be a big winner in consolidating capital markets.

Shares on Wall Street rose 2 per cent after data was published showing US construction spending surged to a 18-month peak in November and manufacturing activity grew at its fastest pace in six months during December.

The Standard and Poor's 500 Index climbed to a two-month high. All ten of the main industry groups on the index rose except for the utility stocks.

Bank of Americam, Alcoa, JPMorgan Chase and Caterpillar rallied more than 3.5 per cent to lead gains in 28 of 30 stocks in the Dow Jones Industrial Average.

European stocks ended at a five-month closing high. The FTSEurofirst 300 index of top European shares rose 1.6 percent to 1,028.00 points, its highest close since August, on volume that was two thirds of average over the past 90 days. The main movers were BHP Billiton, the world’s biggest mining stock, and rival Rio Tinto which climbed 6.2 per cent and 6.4 per cent respectively.

Germany’s DAX gained 1.5 per cent as the auto sector climbed 3 per cent on new car registrations rising 6.1 per cent in December. France's CAC 40 rose 0.7 per cent.

COMMODITIES

Prices paid for copper, which is used in power and construction, hit three-week highs after the expansion in manufacturing in the US and China boosted hopes for stronger metals demand.

(Additional reporting - Reuters and Bloomberg)